Item 8.01. Other events.
credit acceptance company (the “Company”, “Acceptance of Credit”, “we”, “us” or “our”), in connection with the disclosures that the Company intends to make to potential investors in connection with a possible debt offering, reports the following updates regarding legal issues:
On October 2, 2020a shareholder has filed a putative class action lawsuit against the Company, its CEO (now former CEO) and its CFO (now CEO) in the
United States District Court for the Eastern District of MichiganSouthern Division, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, based on alleged false statements or omissions and/or misleading regarding the Company and its business, and seeking class certification, unspecified damages plus interest and attorney’s and expert witness fees and other costs on behalf of a purported class consisting of all persons and entities (subject to specified exceptions) who have purchased or otherwise acquired Credit acceptance ordinary shares of November 1, 2019 through August 28, 2020. On May 28, 2021, the court issued an opinion and an order naming the lead plaintiffs and lead counsel. On July 22, 2021the principal plaintiffs filed an amended complaint alleging similar violations, seeking similar relief, and expanding the putative class to include all persons and entities (subject to specified exceptions) who purchased or otherwise acquired
Credit acceptance ordinary shares of May 4, 2018 through August 28, 2020. On June 14, 2022, the Company has reached an agreement in principle to settle this putative class action. The agreement in principle provided for a global cash payment by the Company of $12.0 million to settle claims brought on behalf of all persons and entities who have purchased or otherwise acquired Credit acceptance
ordinary shares of May 4, 2018 through August 28, 2020. On August 24, 2022, the parties executed and filed with the court a final stipulation and settlement agreement, hereinafter referred to as the Settlement Agreement, which was consistent with the Agreement-in-Principle and provides for a complete release of all claims against all defendants, including the Company and its officers. The Settlement Agreement provides that the Defendants expressly deny any liability, wrongdoing or liability. On September 19, 2022the court issued an order tentatively approving the settlement agreement and scheduled for December 7, 2022, a hearing to consider final approval. The Settlement Agreement provides that, upon final court approval of the Settlement Agreement, the Litigation would be dismissed with prejudice. At this time, there can be no assurance that the court will grant final approval of the settlement agreement and that the dispute will be finally resolved in accordance with the settlement agreement. We estimated a probable loss of $12.0 millionall of which was recognized as a contingent loss during the second quarter of 2022, in connection with this litigation.
On May 7, 2019the Company has received a subpoena from the Office of the Office against Fraud and Consumer Protection of the New York State Attorney General, regarding the Company’s origination and collection policies and procedures in the State of New York. On July 30, 2020we received two additional subpoenas from the
New York State Attorney General’s Officeboth of the Office of Fraud and Consumer Protection and the Investor Protection Officeregarding the Company’s origination and collection policies and procedures in the State of New York and its securitizations. On August 28, 2020, we were informed that one of the two additional quotes was withdrawn. On November 16, 2020we have received an additional subpoena for documents from the New York State Attorney General’s Office. On November 19, 2020the Company received a letter from New York State Attorney General’s Office indicating that the New York State The Attorney General was considering bringing charges against the company under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), New York Executive Act § 63(12 ), New York Martin Law and New York General Law. Business Law § 349 in relation to the Company’s origination and securitization practices. On December 9, 2020we answered the New York State Letter from the Attorney General disputing the assertions contained therein. On December 21, 2020we received two additional subpoenas from the New York State Attorney General’s Office, one relating to data and the other looking for testimonials. On
February 24 and April 30, 2021we received additional subpoenas from the New York State Attorney General’s Office seeking information relating to his investigation. On August 23, 2022we received a letter from Office of the Office against Fraud and Consumer Protection of the New York State Attorney General stating that the New York State Attorney General’s Office intends to take legal action against the Company alleging violations of New York Executive Law § 63(12) and General Commercial Law §§ 349 and 352 and after. and applicable federal laws, including, but not limited to, claims that the Company has engaged in unfair and deceptive business practices in the area of auto loans, debt collection and asset-backed securitizations. active in the New York State in violation of Dodd-Frank, New York Executive Law § 63(12), Martin Law of New York, and General Business Law of New York § 349, and seeking an injunction, restitution, civil penalties, damages, disgorgement, reform, voidance, costs, and such other relief as the court may deem just and proper. We cannot predict the scope, duration or eventual outcome of this investigation or the scope, duration or outcome of any such litigation at this time. Accordingly, we are unable to estimate the reasonably possible loss or the range of reasonably possible losses arising from this investigation or any such litigation. The Company intends to vigorously defend itself in such litigation.
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